**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-Q**





**x** **Quarterly
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934**





For
      the
      quarterly period ended September 30, 2007





**OR**





**o** **Transition
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934** ****


For
      the
      transition period from __________ to __________





**Commission
      File Number 001-14015**





**IONATRON,
      INC.**





(Exact
      Name of Registrant as Specified in Its Charter)





**Delaware**
            
            **77-0262908**(State
                or Other Jurisdiction of Incorporation or
              Organization)
            
            (IRS
                Employer Identification Number)


**3716
                  East Columbia Street, Suite 120****Tucson,
                  Arizona**
              
              **85714**(Address
                  of Principal Executive Offices)
              
              (Zip
                  Code)**Registrant’s
                  telephone number, including area code****(520)
                  628-7415**


Indicate
      by check mark whether the registrant: (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.   Yes x
      No o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, an accelerated filer, or a non-accelerated filer. See
      definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of
      the Exchange Act. (Check one):


Large
      Accelerated Filer o Accelerated Filer x  Non-Accelerated Filer o





Indicate
      by check mark whether the Registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act)


Yes
o
      No x





Indicate
      the number of shares outstanding of each of the issuer's classes of common
      equity, as of the latest practicable date. As of November 7, 2007, there were 79, 590,469
      shares of the issuer's common stock, par value $.001 per share,
      outstanding.







IONATRON,
      INC.


September  30,
      2007





PART
                I -
            FINANCIAL
                INFORMATIONItem
                1-
            Consolidated
                Financial StatementsConsolidated
                Balance Sheets as of September 30, 2007 (Unaudited) andDecember
                31, 2006
            3Consolidated
                Statements of Operations for the three months ended September 30,
                2007 and
                2006 (Unaudited)
            4Consolidated
                Statements of Operations for the nine months ended September 30,
                2007 and
                2006 (Unaudited)
            5Consolidated
                Statements of Cash Flows for the nine months ended September 30,
                2007 and
                2006 (Unaudited)
            6Notes
                to Consolidated Financial Statements
            7Item
                2-
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            13Item
                4-
            Controls
                and Procedures
            19PART
                II -
            OTHER
                INFORMATIONItem
                4-
            Submission
                of Matters to a Vote of Security Holders
            20Item
                6-
            Exhibits
            20SIGNATURES
            
            21




-
          2
          -




**PART
      I FINANCIAL INFORMATION**


**ITEM
      1. CONSOLIDATED FINANCIAL STATEMENTS**





IONATRON,
                INC.CONSOLIDATED
                BALANCE SHEETS




**September 30, 2007**
            
            **December 31, 2006****(Unaudited)**ASSETSCurrent
                assetsCash
                and cash equivalents
            
            $
            16,942,067
            
            $
            22,123,792Accounts
                receivable - net
            
            
            1,877,469
            
            
            640,082Inventory
            
            
            1,455,220
            
            
            2,832,752Securities
                available-for-sale
            
            
            8,500,000
            
            
            8,500,000Prepaid
                expenses and deposits
            
            
            186,156
            
            
            639,728Other
                receivables
            
            
            1,237
            
            
            2,918Total
                current assets
            
            
            28,962,149
            
            
            34,739,272Property
                and equipment - net
            
            
            1,776,758
            
            
            2,205,278Other
                assets
            
            
            34,516
            
            
            72,776Intangible
                assets - net
            
            
            98,400
            
            
            135,300TOTAL
                ASSETS
            
            $
            30,871,823
            
            $
            37,152,626LIABILITIES
                AND STOCKHOLDERS’ EQUITYCurrent
                liabilitiesAccounts
                payable - net
            
            $
            1,259,451
            
            $
            570,572Accrued
                expenses
            
            
            411,785
            
            
            638,925Accrued
                compensation
            
            
            764,339
            
            
            818,779Customer
                deposits
            
            
            492,877
            
            
            284,279Current
                portion of capital lease obligations
            
            
            17,413
            
            
            46,974Total
                current liabilities
            
            
            2,945,865
            
            
            2,359,529Capital
                lease obligations
            
            
            4,491
            
            
            30,536Deferred
                rent
            
            
            125,034
            
            
            112,641Total
                liabilities
            
            
            3,075,390
            
            
            2,502,706Commitments
                and contingenciesStockholders’
                equitySeries
                A Convertible Preferred stock, $.001 par value, 2,000,000
              sharesauthorized
                and 690,000 shares issued and outstanding at
              September
                30, 2007 and December 31, 2006.
            
            
            690
            
            
            690Common
                stock, $.001 par value, 125,000,000 shares authorized;
              79,189,151shares
                issued and outstanding at September 30, 2007 and
              78,171,267shares
                issued and outstanding at December 31, 2006
            
            
            79,189
            
            
            78,171Additional
                paid-in capital
            
            
            64,296,743
            
            
            60,488,633Accumulated
                deficit
            
            
            (36,580,189
            )
            
            (25,917,574
            )Total
                stockholders’ equity
            
            
            27,796,433
            
            
            34,649,920TOTAL
                LIABILITIES AND STOCKHOLDERS’ EQUITY
            
            $
            30,871,823
            
            $
            37,152,626




See
                accompanying notes to consolidated financial statements
                (unaudited)




-
          3
          -




IONATRON,
                INC.CONSOLIDATED
                STATEMENTS OF OPERATIONS(Unaudited)




For the three months ended
              September 30,2007
            
            2006Revenue
            
            $
            3,608,584
            
            $
            1,537,314Cost
                of revenue
            
            
            4,143,906
            
            
            1,539,077Gross
                loss
            
            
            (535,322
            )
            
            (1,763
            )Operating
                expenses:General
                and administrative
            
            
            4,348,838
            
            
            2,492,610Selling
                and marketing
            
            
            76,340
            
            
            144,522Research
                and development
            
            
            548,895
            
            
            967,850Total
                operating expenses
            
            
            4,974,073
            
            
            3,604,982Operating
                loss
            
            
            (5,509,395
            )
            
            (3,606,745
            )Other
                (expense) incomeInterest
                expense
            
            
            (453
            )
            
            (2,122
            )Interest
                income
            
            
            341,872
            
            
            255,093Other
            
            
            -
            
            
            500Total
                other
            
            
            341,419
            
            
            253,471Loss
                before provision for income taxes
            
            
            (5,167,976
            )
            
            (3,353,274
            )Provision
                for income taxes
            
            
            -
            
            
            10,199Net
                loss
            
            
            (5,167,976
            )
            
            (3,363,473
            )Preferred
                stock dividends
            
            
            (295,108
            )
            
            (298,054
            )Net
                loss attributable to common stockholders
            
            $
            (5,463,084
            )
            $
            (3,661,527
            )Net
                loss per common share – basic and diluted
            
            $
            (0.07
            )
            $
            (0.05
            )Weighted
                average number of shares outstanding, basic and diluted
            
            
            79,107,767
            
            
            76,084,796




See
                accompanying notes to consolidated financial statements
                (unaudited)





-
          4
          -




IONATRON,
                INC.CONSOLIDATED
                STATEMENTS OF OPERATIONS(Unaudited)




For the nine months ended
              September 30,2007
            
            2006Revenue
            
            $
            8,828,367
            
            $
            8,609,311Cost
                of revenue
            
            
            9,552,526
            
            
            8,329,486Gross
                profit (loss)
            
            
            (724,159
            )
            
            279,825Operating
                expenses:General
                and administrative
            
            
            8,951,015
            
            
            8,708,326Selling
                and marketing
            
            
            331,155
            
            
            419,771Research
                and development
            
            
            856,722
            
            
            3,244,096Total
                operating expenses
            
            
            10,138,892
            
            
            12,372,193Operating
                loss
            
            
            (10,863,051
            )
            
            (12,092,368
            )Other
                (expense) incomeInterest
                expense
            
            
            (1,941
            )
            
            (11,485
            )Interest
                income
            
            
            1,079,841
            
            
            479,195Other
            
            
            7,847
            
            
            544Total
                other
            
            
            1,085,747
            
            
            468,254Loss
                before provision for income taxes
            
            
            (9,777,304
            )
            
            (11,624,114
            )Provision
                for income taxes
            
            
            -
            
            
            32,101Net
                loss
            
            
            (9,777,304
            )
            
            (11,656,215
            )Preferred
                stock dividends
            
            
            (885,326
            )
            
            (905,377
            )Net
                loss attributable to common stockholders
            
            $
            (10,662,630
            )
            $
            (12,561,592
            )Net
                loss per common share – basic and diluted
            
            $
            (0.14
            )
            $
            (0.17
            )Weighted
                average number of shares outstanding, basic and diluted
            
            
            78,677,306
            
            
            73,858,433




See
                accompanying notes to consolidated financial statements
                (unaudited)





-
          5
          -





IONATRON,
                INC.CONSOLIDATED
                STATEMENTS OF CASH FLOWS(Unaudited)




For the nine months ended
                September 30,2007
              
              2006CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  loss
              
              $
              (9,777,304
              )
              $
              (11,656,215
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Depreciation
                  and amortization
              
              
              756,877
              
              
              687,266Loss
                  (gain) on equipment disposal
              
              
              76,767
              
              
              (3,996
              )Deferred
                  income tax provision
              
              
              -
              
              
              30,598Provision
                  for doubtful accounts
              
              
              -
              
              
              98,400Provision
                  for losses on projects
              
              
              1,165,854
              
              
              144,892Provision
                  for warranty
              
              
              13,940
              
              
              -Non-cash
                  stock based compensation expense
              
              
              2,809,980
              
              
              3,096,750Changes
                  in assets and liabilities:Accounts
                  receivable
              
              
              (1,237,387
              )
              
              3,343,553Other
                  receivable
              
              
              1,681
              
              
              17,395Inventory
              
              
              211,678
              
              
              (1,905,837
              )Prepaid
                  expenses and deposits
              
              
              491,832
              
              
              174,568Accounts
                  payable
              
              
              688,879
              
              
              (557,425
              )Billings
                  in excess of costs
              
              
              -
              
              
              (84,208
              )Accrued
                  expenses, deposits and deferred rent
              
              
              (74,529
              )
              
              3,968Net
                  cash used in operating activities
              
              
              (4,871,732
              )
              
              (6,610,291
              )CASH
                  FLOWS FROM INVESTING ACTIVITIES:Purchase
                  of equipment
              
              
              (385,404
              )
              
              (833,079
              )Proceeds
                  from sale of available-for-sale marketable securities
              
              
              -
              
              
              4,000,000Purchases
                  of available-for-sale marketable securities
              
              
              -
              
              
              (500,000
              )Proceeds
                  from disposal of equipment
              
              
              17,180
              
              
              6,899Net
                  cash (used in) provided by investing activities
              
              
              (368,224
              )
              
              2,673,820CASH
                  FLOWS FROM FINANCING ACTIVITIES:Proceeds
                  from sale of common stock and warrants
              
              
              -
              
              
              24,948,750Principal
                  payments on capital lease obligations
              
              
              (55,606
              )
              
              (31,020
              )Exercise
                  of stock options and warrants
              
              
              113,837
              
              
              2,464,888Net
                  cash provided by financing activities
              
              
              58,231
              
              
              27,382,618Net
                  decrease in cash and cash equivalents
              
              
              (5,181,725
              )
              
              23,446,147Cash
                  and cash equivalents, beginning of period
              
              
              22,123,792
              
              
              371,248Cash
                  and cash equivalents, end of period
              
              $
              16,942,067
              
              $
              23,817,395
  See
                  accompanying notes to consolidated financial statements
                  (unaudited)





-
          6
          -




IONATRON,
        INC.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 September
        30, 2007
 (unaudited)


**1.**
            **BASIS
                OF PRESENTATION**





The
      consolidated financial statements include the accounts of Ionatron and our
      wholly owned subsidiaries, Ionatron Technologies, Inc. and North Star as of
      September 30, 2007 (collectively, "Company," "Ionatron," "we," "our" and "us").
      All intercompany balances and transactions have been eliminated. In the opinion
      of management, all adjustments (which include normal recurring adjustments)
      necessary for a fair presentation of the results for the interim periods
      presented have been made. The results for the nine-month period ended September
      30, 2007, may not be indicative of the results for the entire year. The interim
      unaudited condensed consolidated financial statements should be read in
      conjunction with the Company's audited consolidated financial statements
      contained in our Annual Report on Form 10-K. Certain reclassifications have
      been
      made to prior period amounts to conform to the current period presentation.





**USE
      OF ESTIMATES**





The
      preparation of consolidated financial statements in conformity with United
      States generally accepted accounting principles, which requires management
      to
      make estimates, judgments and assumptions that affect the amounts reported
      in
      the financial statements and accompanying notes. Management bases its
      assumptions on historical experiences and on various other assumptions that
      it
      believes to be reasonable under the circumstances, the results of which form
      the
      basis for making judgments about the carrying values of assets and liabilities
      that are not readily apparent from other sources. In addition, Management
      considers the basis and methodology used in developing and selecting these
      estimates, the trends in and amounts of these estimates, specific matters
      affecting the amount of and changes in these estimates, and any other relevant
      matters related to these estimates, including significant issues concerning
      accounting principles and financial statement presentation. Such estimates
      and
      assumptions could change in the future, as more information becomes known which
      could impact the amounts reported and disclosed herein. Significant estimates
      include revenue recognition under the percentage of completion method of
      contract accounting, estimate to forecast loss on a contract under completed
      contract method of accounting, the valuation of inventory, estimate
      to forecast expected forfeiture rate on stock-based awards and
      stock-based compensation expense.





**RECENT
      ACCOUNTING PRONOUNCEMENTS**





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities - Including an amendment of FASB
      Statement No. 115,” which permits entities to choose certain financial assets
      and certain other items at fair value. Unrealized gains and losses on items
      for
      which the fair value option has been elected are reported in earnings. SFAS
      No.
      159 is effective as of the beginning of an entity’s first fiscal year that
      begins after November 15, 2007. The Company is currently evaluating the impact
      of the adoption of SFAS No. 159; however, it is not expected to have a material
      impact on the Company’s consolidated financial position or results of
      operations.





**2.**
            **ACCOUNTS
                RECEIVABLE**





Accounts
      receivable consist of the following as of September 30, 2007 and December 31,
      2006:





September 30, 2007
            
            December 31, 2006Contracts
                receivable
            
            $
            699,054
            
            $
            502,243Retained
            
            
            100,000
            
            
            100,000Cost
                and estimated earnings on uncompleted contracts
            
            
            1,078,415
            
            
            44,1161,877,469
            
            
            646,359Less:Allowance
                for doubtful accounts
            
            
            -
            
            
            6,277Total
            
            $
            1,877,469
            
            $
            640,082




Contract
      receivables at September 30, 2007 and December 31, 2006 are expected to be
      collected within a year. The retained balances represent a contract reserve
      for
      which a customer has been billed. We expect payment of this reserve pending
      the
      completion of a review by the customer of the project costs. The allowance
      for
      doubtful accounts represents an estimate for potentially uncollectible accounts
      receivable related to non-governmental customers that is based upon a review
      of
      the individual accounts outstanding and the Company’s prior history of
      uncollectible accounts receivable.




-
          7
          -


IONATRON,
        INC.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 September
        30, 2007
 (unaudited)




Costs
                and Estimated Earnings on Uncompleted
                Contracts


September 30, 2007
                
                December 31, 2006Cost
                    incurred on uncompleted contracts
                
                $
                7,564,223
                
                $
                127,622Estimated
                    earnings
                
                
                581,261
                
                
                28,902Total
                    billable costs and estimated earnings
                
                
                8,145,484
                
                
                156,524Less:Billings
                    to date
                
                
                7,067,069
                
                
                112,408Total
                
                $
                1,078,415
                
                $
                44,116Included
                    in accompanying balance sheet under the following
                    captions:Unbilled
                    costs and estimated earnings on uncompleted contractsincluded
                    in accounts receivable
                
                $
                1,078,415
                
                $
                44,116Billings
                    in excess of costs and estimated earnings on uncompleted
                    contracts
                
                
                -
                
                
                -Total
                
                $
                1,078,415
                
                $
                44,116




**3.**
            **INVENTORY**





Our
      inventories consist of the following as of September 30, 2007 and December
      31,
      2006:





September 30, 2007
            
            December 31, 2006Raw
                materials
            
            $
            274,244
            
            $
            1,242,146Work-in-process
            
            
            1,180,976
            
            
            1,590,606Total
            
            $
            1,455,220
            
            $
            2,832,752








The
      September 30, 2007 and December 31, 2006 inventory totals contain approximately
      $874,000 and $468,000, respectively, of allocated general and administrative
      costs. During the third quarter ended September 30, 2007 the Company reduced
      the
      carrying value to lower-of-cost-or-market of inventory not technologically
      current or that was directly associated with our remotely controlled vehicle
      development amounting to $1.5 million charged to general and administrative
      expense. In addition, the Company recorded a provision for loss on a
      non-government contract of $812,000 associated with the development of a new
      technology. This provision reduced work-in-process inventory and was charged
      to
      cost of sales.





**4.**
            **STOCK-BASED
                COMPENSATION**




Stock
      Based Compensation – Employees and Directors





Effective
      January 1, 2006, the Company adopted the fair value recognition provisions
      of
      Statement of Financial Accounting Standards No. 123(R), “Share Based Payment”
(“SFAS No. 123(R)”), using the modified prospective transition method. For the
      three months ended September 30, 2007 and 2006, stock-based compensation expense
      totaled $1.0 million and $950,000, respectively. For the nine months ended
      September 30, 2007 and 2006, stock-based compensation expense totaled $2.8
      million and $2.9 million, respectively. There is no related income tax benefit
      recognized because our deferred tax assets are fully offset by a valuation
      allowance.




-
          8
          -


IONATRON,
        INC.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 September
        30, 2007
 (unaudited)
 The
        fair
        value of option awards are estimated using a Black-Scholes option pricing
        model
        that uses the assumptions noted in the following table:





Nine Months Ended September 30,2007
            
            2006Expected
                life (years)
            
            4
                years
            
            2.5
                yearsDividend
                yield
            
            0.0%
            
            0.0%Expected
                volatility
            
            46.00%
            
            38.4%
                - 42.7%Risk
                free interest rates
            
            4.55%
                - 4.74%
            
            4.6%
                - 5.0%Weighted
                average fair value of options at grant date
            
            $1.94
            
            $2.04




The
      following table summarizes the stock options outstanding as of September 30,
      2007 as well as activity during the nine months then ended:





Weighted AverageShares
            
            Exercise PriceOutstanding
                at December 31, 2006
            
            
            5,562,473
            
            $
            6.10Granted
            
            
            456,500
            
            $
            4.66Exercised
            
            
            (473,250
            )
            $
            0.83Forfeited
            
            
            (382,000
            )
            $
            7.31Outstanding
                at September 30, 2007
            
            
            5,163,723
            
            $
            6.37Exercisable
                at September 30, 2007
            
            
            2,866,803
            
            $
            6.29




As
      of
      September 30, 2007, the weighted average remaining contractual life of options
      outstanding and options exercisable was 3.47 and 3.20 years, respectively.
      There
      was an estimated $4.4 million of total unrecognized compensation cost related
      to
      unvested stock option awards as of September 30, 2007. As of September 30,
      2007,
      the aggregate intrinsic value (amount by which the market value of a share
      of
      the Company’s common stock exceeds the exercise price of the option) of options
      outstanding as well as options exercisable was $150,000 for 326,125 options
      in-the-money.





In
      August
      2007, the Board granted certain employees 395,000 grants of restricted stock
      units under the 2004 Stock Incentive Plan. These awards have a grant date fair
      value of $2.84 per unit and will vest over the next two years and five months
      from the date of grant.





The
      following table summarizes nonvested restricted stock units outstanding as
      of
      September 30, 2007 and changes during the nine months then ended September
      30,
      2007:


Weighted AverageShares
              
              Exercise PriceNonvested
                  at December 31, 2006
              
              
              -Granted
              
              
              395,000
              
              $
              2.84Nonvested
                  at September 30, 2007
              
              
              395,000
              
              $
              2.84




As
      of
      September 30, 2007, there was $899,000 of unrecognized stock-based compensation
      related to nonvested restricted stock units which we expect to recognize over
      a
      weighted-average period of 1.3 years.




-
          9
          -


IONATRON,
        INC.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 September
        30, 2007
 (unaudited)


In
      October 2007, the Board granted to our CEO and President 275,000 shares of
      restricted common stock under the 2007 Stock Incentive Plan. These awards have
      a
      grant date fair value of $3.55 per restricted share (the closing price on the
      date of the grant) and vest as to 68,750 shares annually on each January
      10 th from
      2008 through 2011.





In
      October 2007, the Board granted to our CFO 80,000 shares of restricted common
      stock under the 2007 Stock Incentive Plan. These awards have a grant date fair
      value of $3.55 per restricted share (the closing price on the date of the grant)
      and vest as to 26,666 shares on January 10, 2008 and as to 26,667 shares on
      each
      of January 10, 2009 and January 10, 2010.





In
      October 2007, as an inducement to a senior engineer to join Ionatron, the
      Company issued 117,000 restricted stock units outside of the terms of any
      existing Ionatron equity incentive plan. These awards have a grant date fair
      value of $4.12 per unit and vested as to 42,000 shares on the individual’s start
      date and vest as to 25,000 shares on each of the three anniversaries of the
      individual’s start date.




Stock
      Options and Warrants - Non-Employees





At
      September 30, 2007 and 2006 there were outstanding warrants to purchase 1.1
      million and 1.6 million shares of common stock, respectively, which were either
      (i) issued in connection with the August 2006 financing, (ii) issued to outside
      consultants, or (iii) outstanding at the date of the merger.





Compensation
      expense of approximately $0 and $165,000 for the three months ended September
      30, 2007 and 2006, respectively and approximately $55,000 and $258,000 for
      the
      nine months ended September 30, 2007 and 2006, respectively, was recorded for
      options and warrants issued to non-employees. Offsetting entries of $55,000
      and
      $214,000 were posted to additional paid-in capital for the compensation expenses
      in the nine months ended September 30, 2007 and 2006, respectively.





**5.**
            **RETIREMENT
                PLANS**





We
      have a
      401(K) plan for the benefit of our employees. Employees are eligible to
      contribute to their 401(K) accounts through payroll deductions. During the
      third
      quarter 2007, we implemented an employer match benefit effective January 1,
      2007
      where we match 50% of the employees’ 401(K) contribution up to 3% of their
      eligible compensation. This employer match expense included $65,000 for the
      period January through June 2007 and $33,000 for the period July through
      September 2007.





**6.**
            **INCOME
                TAXES**





We
      adopted the provisions of Financial Standards Accounting Board Interpretation
      No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”) an
      interpretation of FASB Statement No. 109 (“SFAS 109”) on January 1, 2007. The
      adoption of FIN 48 did not impact the consolidated balance sheet, results of
      operations or cash flows. At the adoption date of January 1, 2007 and at
      September 30, 2007, we had unrecognized tax benefits of $9.6 million
      attributable to losses that were incurred by USHG prior to the merger in March
      2004. These benefits are not recognized because of uncertainty regarding the
      utilization of the net operating loss carryforwards. If in the future, we
      resolve the uncertainty in our favor, the full amount will favorably affect
      our
      effective income tax rate.





We
      recognize interest and penalties related to unrecognized tax benefits in income
      tax expense. As of September 30, 2007, we had no accrued interest or penalties
      related to our unrecognized tax benefits.





We
      did
      not record a provision for taxes in 2007 because we reduced the fair value
      of
      goodwill to zero in the fourth quarter of 2006. For the three months and nine
      months ended September 30, 2006, we recorded provisions for income taxes of
      approximately $10,000 and $32,000, respectively, due to an increase in deferred
      tax liabilities as a result of the tax amortization of our goodwill.





We
      file
      income tax returns in the Federal and various state jurisdictions. With certain
      exceptions, the Company is no longer subject to audit for years prior to the
      year ended December 31, 2003.





-
          10
          -


IONATRON,
        INC.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 September
        30, 2007
 (unaudited)


**7.**
            **SIGNIFICANT
                CUSTOMERS**





The
      substantial majority of our customers are either the U.S. Government or
      contractors to the U.S. Government and represents approximately 97% and 96%
      of
      revenues for each of the nine months ended September 30, 2007 and 2006,
      respectively and approximately 99% and 94% of revenues for each of the three
      months ended September 30, 2007 and 2006, respectively.




**8.**
            **NET
                LOSS PER SHARE**





Basic
      loss per share is computed as net loss attributable to common stockholders
      divided by the weighted average number of common shares outstanding for the
      period. Diluted loss per share reflects the potential dilution that could occur
      from common shares issuable through exercise of stock options and warrants
      and
      common shares issuable upon the conversion of convertible instruments. Options,
      warrants, restricted stock units and our Series A Convertible Preferred Stock,
      which were not included in the total of diluted shares because the effect was
      antidilutive, was 482,880 and 1,074,424 shares for the three months ended
      September 30, 2007 and 2006, respectively, and 463,374 and 751,624 for the
      nine
      months ended September 30, 2007 and 2006.





**9.**
            **DIVIDENDS**





Under
      a
      standing Board resolution, a 6.5% dividend was paid on November 1, 2007 to
      the
      holders of our Series A Redeemable Cumulative Preferred Stock and the dividend
      was paid in shares of our common stock to the holders of record on October
      15,
      2007. Dividends on Preferred Stock are accrued when the amount of the dividend
      is determined. The non-cash dividend of approximately $295,000 is reflected
      in
      our September 30, 2007 balance sheet. The recording of the dividend had no
      effect on our cash or total equity. Dividends on our Preferred Stock are payable
      quarterly on the first day of February, May, August and November, in cash or
      shares of Common Stock, at the discretion of the Company.





**10.**
            **COMMITMENTS
                AND CONTINGENCIES**





**OPERATING
      LEASES**





In
      September 2007, at the request of a government agency that desired to use the
      facility for a different purpose, we relinquished our interest in the leased
      facilities at the Stennis Space Center in Mississippi. **** The
      monthly commitment under the lease of approximately $23,000 will cease beginning
      in October 2007. Our associated unamortized leasehold improvements will accrue
      to the benefit of the new tenant that resulted in a charge of $72,000 as a
      part
      of the transaction.





**LITIGATION**





In
      July
      2006, two class action complaints were filed by George Wood and Raymond Deedon
      against Ionatron and its founders. Each of the class actions was filed in the
      United States District Court for the District of Arizona and allege, among
      other
      things, violations of Section 10(b) of the Securities Exchange Act of 1934
      and
      Rule 10b-5, claiming that the Company issued false and misleading statements
      concerning the development of its counter-IED product. The court consolidated
      these cases, and a consolidated amended complaint was served. The Company and
      the individual defendants moved to dismiss the consolidated amended complaint
      for failure to state a cause of action. The plaintiffs have opposed the
      Company’s motion to dismiss. Oral arguments have been scheduled to take place in
      December 2007. We are unable to evaluate the likelihood of an unfavorable
      outcome in this matter or estimate the range of potential loss, if any. However,
      the Company intends to defend itself vigorously in these legal
      proceedings.




In
      September 2006, a derivative action was filed by John T. Johnasen in Arizona
      State Court, Pima County, against certain of the Company’s officers and
      directors, alleging, among other things, breach of fiduciary duty. On June
      29,
      2007, the state court extended the stay of the derivative action until 30 days
      after the federal district court rules on the Company’s motion to dismiss the
      consolidated complaint in the class action described above.




In
      addition, we may from time to time be involved in legal proceedings arising
      from
      the normal course of business. As of the date of this report, we have not
      received notice of any other legal proceedings.





-
          11
          -


IONATRON,
        INC.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 September
        30, 2007
 (unaudited)




**11.**
            **AUTHORIZED
                COMMON STOCK**





At
      the
      Annual Meeting of Stockholders of Ionatron, Inc. held on September 10, 2007,
      stockholders approved the amendment of the Company’s Certificate of
      Incorporation to effect an increase in the number of authorized shares of common
      stock from 100,000,000 to 125,000,000 shares.





-
          12
          -




**ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS**





Our
      discussion and analysis of the financial condition and results of operations
      should be read in conjunction with the unaudited consolidated financial
      statements and the related disclosures included elsewhere herein and in
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations included as part of our Annual Report on Form 10-K for the year
      ended
      December 31, 2006.





**CAUTIONARY
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**





Certain
      statements in this Quarterly Report on Form 10-Q constitute forward-looking
      statements within the meaning of the securities laws. Forward-looking statements
      include all statements that do not relate solely to the historical or current
      facts, and can be identified by the use of forward looking words such as "may",
      "believe", "will", "expect", "expected", "project", "anticipate", "anticipated
      estimates", "plans", "strategy", "target", "prospects" or "continue". These
      forward looking statements are based on the current plans and expectations
      of
      our management and are subject to a number of uncertainties and risks that
      could
      significantly affect our current plans and expectations, as well as future
      results of operations and financial condition and may cause our actual results,
      performances or achievements to be materially different from any future results,
      performances or achievements expressed or implied by such forward-looking
      statements. Important factors that could cause our actual results to differ
      materially from our expectations are described Item 1A. (Risk Factors) of our
      Annual Report on Form 10-K for the year ended December 31, 2006. In making
      these
      forward-looking statements, we claim the protection of the safe-harbor for
      forward-looking statements contained in the Private Securities Reform Act of
      1995. Although we believe that the expectations reflected in such
      forward-looking statements are reasonable, there can be no assurance that such
      expectations will prove to have been correct. We do not assume any obligation
      to
      update these forward-looking statements to reflect actual results, changes
      in
      assumptions, or changes in other factors affecting such forward-looking
      statements.





**OVERVIEW**





Ionatron
      is a developer and manufacturer of applied energy systems, primarily for
      military applications, utilizing our proprietary knowledge of high performance
      lasers, high voltage electronics, advanced adaptive optics and atmospheric
      and
      plasma energy interactions. Ionatron applies these technologies to deliver
      innovative solutions to urgent military missions, including neutralizing
      Improvised Explosive Devices (“IEDs”), neutralizing vehicle-borne IEDs (i.e. car
      bombs), and non-lethal methods for vehicle stopping, among other high priority
      missions of U.S. and allied military forces. Additionally, Ionatron develops
      and
      manufactures high voltage and laser products for government and commercial
      customers for a range of applications.





Ionatron
      is the sole and exclusive developer of Laser Guided Energy (“LGE©”) and Laser
      Induced Plasma Channel (“LIPC tm ”)
      technologies. These revolutionary technologies can precisely transmit high
      voltage electrical charges by using a laser to create a conductive path in
      the
      atmosphere. This technique can deliver tailored weapon and countermeasure
      effects to targets with laser accuracy, and with manageable lethality to reduce
      the potential for inadvertent injury and collateral damage. This technology
      has
      been in development since the Company’s inception in 2002, and the Company has
      protected what it believes to be the enabling intellectual property through
      U.S.
      Patent filings. LGE development is currently funded through multiple Department
      of Defense (“DoD”) contracts in support of U.S. Navy, Army, Air Force, and the
      Office of Secretary of Defense program objectives.





Ionatron
      has engaged in research and development, prototype system integration and field
      support, engineering design and equipment fabrication, and business development
      activities. Ionatron has entered into several contracts with its customers
      for
      products and services as well as Cooperative Research and Development Agreements
      (“CRADA”) for research on LGE and LIPC-based directed energy weapons,
      counter-IED systems, high voltage electronics, lasers, and technology
      development. In 2005, the Company was contracted to deliver counter-IED
      prototypes for U.S. military customers and to support those systems for testing
      and in-theatre operations. We are currently involved in a follow-on counter-IED
      program funded by the Joint IED Defeat Organization (“JIEDDO”) in support of a
      U.S. Marine Corps urgent need request, and we are pursuing opportunities to
      manufacture and support additional systems and derivatives to these and other
      U.S. and allied military forces and non-government security customers in the
      future.





Regarding
      our emerging LGE products, we have demonstrated this directed energy technology
      in the laboratory; examined the weapon effects on a variety of targets both
      under Government contract and using internal research and development funding;
      delivered a compact laser system specifically designed to enable the technology
      under a Government contract; and commenced a Government contract for the
      development of a system on a mobile platform for field demonstration and
      testing. We have also, utilizing contract and internal research and development
      funds, developed additional laser sources, advanced high voltage systems,
      special-purpose optical systems, expanded target effects testing, furthered
      our
      understanding of the underlying physics of our systems and products and entered
      into teaming agreements with other defense contractors regarding cooperative
      development and marketing of our LIPC and LGE technologies and products.




-
          13
          -




Since
      our
      inception, we have pursued the development of a range of core intellectual
      property objectives using internal investment, and have vigorously pursued
      patents on such technology. This approach is designed to establish a sole source
      for us in customer-funded technology and product development contracts, as
      well
      as establish barriers to potential competition. Our patent applications, in
      tandem with our significant proprietary knowledge, may be used as justification
      for sole source contracts in accordance with Federal Acquisition Regulations,
      and thereby may reduce the likelihood of competitive solicitations. Presently,
      five patents have issued and 30 patent applications are pending. Seventeen
      of
      the 30 pending patent applications have received Government initiated “national
      security related” secrecy orders. The U.S. patent office imposes secrecy orders
      when disclosure of an invention by publication of a patent would be detrimental
      to the United States National Security. These patents are treated as under
      review unless and until they are declassified, at which time patents may be
      issued, with enforcement based on the original filing date. We have thus far
      received notice that two of these secrecy order patent applications have been
      declassified and the claims have been accepted by the patent office. These
      patents and patent applications relate to our core LIPC technology, counter-IED
      offerings, and other technologies related to LGE, laser and high voltage
      applications.





At
      the
      request of our Government customers, Ionatron developed major components,
      complete solutions, and integrated systems that demonstrate significant
      capability in countering IEDs, a major threat to military and security
      operations throughout the world. We completed numerous Government-sponsored
      tests of several prototype counter-IED systems. Technical results of such
      counter-IED testing are highly sensitive or classified, but we are satisfied
      that the full range of these tests accurately reflect the capability of our
      technology in addressing this critical mission. We have integrated our
      counter-IED technologies into various military and non-military vehicles,
      including remotely operated vehicles. Because of continued Company-initiated
      innovations, we anticipate additional product variations may be utilized on
      other military platforms in the future as military customers identify new
      candidate areas for implementation of our technologies. We continue to work
      actively with our customers to field our counter-IED technologies. In February
      of 2007, a version of our counter-IED technology was tested in response to
      a
      U.S. Marine Corps (“USMC”) urgent need statement. As a result of this testing,
      the USMC requested and received funding from JIEDDO for development and testing
      of a variant of our counter-IED technology. In September 2007, Ionatron received
      a $1.0 million contract from JIEDDO through the Naval Surface Warfare Center
      for
      engineering development and verification testing of these newly adapted and
      packaged systems. We expect this activity to result in the production of
      multiple units for operational evaluation by the Marine Corps and eventual
      production and fielding. We also expect that successful deployment of this
      system will create opportunities for follow-on engineering development and
      production of similar and derivative systems for other U.S. and allied military
      forces.





Our
      counter-IED customers have recently expressed a preference for our developed
      and
      packaged kits and “palletized” versions of the Company’s counter-IED technology.
      These palletized systems are designed for integration into existing
      combat-rugged vehicles or other platforms supplied by the customer. This
      approach avoids the difficulties of fielding a complex computerized vehicle
      in
      the extremely harsh radio frequency environment of modern combat operations
      where even the most robust communications links can be seriously degraded.
      Accordingly, in the third quarter of 2007 we elected to suspend our internal
      efforts in development of our own remotely operated vehicles which were
      initially designed to carry our counter-IED systems. In connection with this
      prioritization, and as a result of continued advancement of our designs and
      technologies, we re-evaluated certain inventory materials on hand and reduced
      the carrying value to lower-of-cost-or-market for inventory not technologically
      current or that was directly associated with our remotely controlled vehicle
      development. This re-evaluation resulted in a lower-of-cost-or-market inventory
      adjustment of $1.5 million in September 2007. We believe that there remain
      available niche markets for remotely operated vehicle versions of our technology
      for operation in non-hostile environments, but believe that these will be
      longer-term opportunities rather than the current urgent missions.





In
      September 2007, at the request of a non-customer government agency that desired
      the use of our Mississippi facility for a different purpose, we relinquished
      our
      interest in our leased facility at Stennis Space Center. Our Stennis facility
      was initially intended to manufacture our own remotely operated vehicle, and
      with the reduced forecast for this specific embodiment of our counter-IED
      product we expect the relinquishment of this facility to have no material impact
      on our operations in the foreseeable future. The monthly commitment under this
      Stennis lease was approximately $23,000 ceased in early-October 2007. In
      addition, our associated unamortized leasehold improvements will accrue to
      the
      benefit of the new tenant, resulting in a charge of $72,000 as part of the
      transaction.





Government
      support for our LGE and LIPC technologies continues through Congressional
      funding and military service line item funding in to the U.S. Navy budget,
      as
      well as funding that is transferred to the Navy from other services. We were
      awarded a $9.8 million dollar contract by the Navy in April 2007. In August
      2007, the Army Research Development and Engineering Center (“ARDEC”) granted a
      $2.1 million contract for a technology development program for ANVILS (Advanced
      Neutralization Vehicle-borne IEDs Integrated Laser System), for the application
      of directed energy technologies to counter the threat of vehicle-borne IEDs.
      The
      contract was issued through Subsystems Technologies, Inc. of Rosslyn, VA as
      a
      part of an existing services contract that Subsystems has with ARDEC. The U.S.
      Army has approved a RDT&E (Research Development Testing and Evaluation)
      budget line item for further LIPC/LGE development in fiscal year 2008. We are
      working with our Army customer to define the scope of effort under that DoD
      Budget authority. It is anticipated that this will result in a direct contract
      with the Army in the first quarter of 2008.




-
          14
          -




Outside
      our directed energy weapons program, Ionatron is participating in the long-term
      development of an innovative and proprietary aerospace technology in partnership
      with a major aerospace / defense contractor under an Exclusive Supplier
      Agreement. This important customer has made significant investments in concert
      with our own investments to advance this technology. This customer is currently
      funding a contract under this Agreement that includes concept development,
      prototype fabrication and testing, and fabrication and delivery of operational
      hardware systems, and we expect a series of follow-on contracts as this
      technology is matured and readied for use. The initial discussions and
      relationship with this customer accelerated last year, with this Agreement
      being
      formally established earlier this year. This Agreement covers three years with
      options to extend for seven more years. It includes provisions allowing Ionatron
      to pursue non-conflicting applications for the technology including our
      developed hardware and designs. This Agreement limits the range of our public
      disclosure on details regarding the parties, technologies, and applications.
      We
      have deferred recognizing revenue until the initial phase is concluded and
      accepted by the customer. We estimate that our costs to complete will exceed
      customer funding by approximately $1.1 million and have recognized the effect
      of
      these estimates with a loss provision accrual to cost of revenue.





In
      September 2007, we received a 24 month Phase II contract award from the Army
      Research Office for further development of a Light Filament Sensor, which is
      a
      follow on activity resulting from the success of the Phase I effort conducted
      in
      the latter half of 2006 and early 2007. That contract consists of a base
      contract of $390,000 for the first 12 months, with a customer option for the
      second 12 months for another $351,000. This contract is the first in what we
      believe will be a series of new funded technology initiatives advancing the
      ultra-short pulse laser technology in support of LIPC/LGE for use in other
      military and commercial applications.





Our
      progress in development of our LGE and Counter-IED technologies has resulted
      in
      follow-on contracts, including recently announced sole-source development
      activities. In particular, the DoD has identified certain urgent counter-IED
      applications for directed energy, which, we believe, will lead to the
      development and fielding of mission-specific LGE platforms in the foreseeable
      future. Contracted LGE development activities include vehicle stopping and
      counter-Vehicle Borne IED (VBIED) missions, which we believe will lead to
      follow-on contracts for the LGE platform. As these and other counter-IED
      initiatives continue to be advanced by our customer, we will be seeking
      manufacturing opportunities to field the near-term proximity-related
      direct-discharge products and longer-term laser-guided versions of these
      direct-discharge products, as well as, other related proprietary
      technologies.





-
          15
          -


**RESULTS
      OF OPERATIONS**





**COMPARISON
      OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 IS AS
      FOLLOWS:**





2007
            
            2006Revenue
            
            $
            3,608,584
            
            $
            1,537,314Cost
                of revenue
            
            
            4,143,906
            
            
            1,539,077General
                and administrative
            
            
            4,348,838
            
            
            2,492,610Selling
                and marketing
            
            
            76,340
            
            
            144,522Research
                and development
            
            
            548,895
            
            
            967,850Other
                (expense) income:Interest
                expense
            
            
            (453
            )
            
            (2,122
            )Interest
                income
            
            
            341,872
            
            
            255,093Other
            
            
            -
            
            
            500Loss
                before provision for income taxes
            
            
            (5,167,976
            )
            
            (3,353,274
            )Provision
                for income taxes
            
            
            -
            
            
            10,199Net
                loss
            
            $
            (5,167,976
            )
            $
            (3,363,473
            )




**REVENUE**





The
      increase of approximately $2.1 million in revenue for the three months ended
      September 30, 2007 compared to 2006 is attributable to LGE revenue of
      approximately $3.0 million in 2007 compared to $1.3 million in 2006 accompanied
      with an increase in revenue of $516,000 from Counter-IED projects.





**COST
      OF REVENUE**





Cost
      of
      revenue increased approximately $2.6 million when compared to the three months
      ended September 30, 2006 due to increased revenue. Cost of revenue includes
      an
      allocation of general and administrative expenses and research and development
      costs in accordance with the terms of our contracts. The negative gross margin
      in the three months ended September 30, 2007 was primarily due to $880,000
      estimated loss provision accruals attributed to non-government customer based
      contracts.





**GENERAL
      AND ADMINISTRATIVE**





General
      and administrative (“G&A”) expense increased approximately $1.9 million in
      the third quarter 2007 when compared to the third quarter 2006. The increase
      is
      primarily attributable to a $1.5 million lower-of-cost-or-market adjustment
      for
      materials in inventory that became technologically obsolete and a reduction
      of
      $708,000 in applied overhead. We also had an increase of $252,000 for salaries
      and accrued compensation. Offsetting these increases are reductions in temporary
      help and consultants of $234,000 and director and professional costs of
      $176,000.





**SELLING
      AND MARKETING**





Selling
      and marketing expenses decreased approximately $68,000 for the quarter ended
      September 30, 2007 from the same period in 2006 reflecting reduced payroll
      costs.





**RESEARCH
      AND DEVELOPMENT**





Research
      and development (“R&D”) expenses decreased approximately $419,000 during the
      three months ended September 30, 2007 as compared to the same period in 2006
      primarily due the $222,000 reduction of payroll costs from a reduced headcount
      and a redeployment of our technical staff to our funded projects and the
      $214,000 reduction of supplies charged to R&D projects.





-
          16
          -




**INTEREST
      INCOME AND INTEREST EXPENSE**





Net
      interest income for the third quarter of 2007 was higher by approximately
      $88,000 from the same period of 2006 primarily because of the funds provided
      by
      the August 2006 financing were invested in interest bearing accounts for the
      full three-month period in 2007 as compared to less than two months in 2006.





**NET
      LOSS**





Our
      operations for the three months ended September 30, 2007 resulted in a net
      loss
      of approximately $5.2 million, an increase of approximately $1.8 million when
      compared to the $3.4 million loss in the same period of 2006. This increase
      in
      loss reflects an increase in G&A of $1.9 million and a further reduction of
      our gross margin by $534,000, offset by decreases in R&D of approximately
      $419,000 and increases in our net interest income of $88,000.





**COMPARISON
      OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 IS AS
      FOLLOWS:**





2007
            
            2006Revenue
            
            $
            8,828,367
            
            $
            8,609,311Cost
                of revenue
            
            
            9,552,526
            
            
            8,329,486General
                and administrative
            
            
            8,951,015
            
            
            8,708,326Selling
                and marketing
            
            
            331,155
            
            
            419,771Research
                and development
            
            
            856,722
            
            
            3,244,096Other
                (expense) income:Interest
                expense
            
            
            (1,941
            )
            
            (11,485
            )Interest
                income
            
            
            1,079,841
            
            
            479,195Other
            
            
            7,847
            
            
            544Loss
                before provision for income taxes
            
            
            (9,777,304
            )
            
            (11,624,114
            )Provision
                for income taxes
            
            
            -
            
            
            32,101Net
                loss
            
            $
            (9,777,304
            )
            $
            (11,656,215
            )




**REVENUE**





Revenue
      improved by approximately $219,000 for the nine months ended September 30,
      2007
      compared to 2006 primarily due to an increase in revenue from our LGE project
      of
      $3.8 million, which was offset by a decrease of $3.2 million from our
      Counter-IED projects and a decrease in our non-governmental projects of
      $343,000.





**COST
      OF REVENUE**





Cost
      of
      revenue increased approximately $1.2 million when compared to the nine months
      ended September 30, 2006 due partially to increased revenue. Cost of revenue
      includes an allocation of general and administrative expenses and research
      and
      development costs in accordance with the terms of our contracts. The negative
      gross margin in the first nine months of 2007 was primarily due to $1.1 million
      estimated loss accruals attributed to non-government customer based
      contracts.





**GENERAL
      AND ADMINISTRATIVE**





G&A
      expense increased approximately $243,000 in the first nine months of 2007 when
      compared to the first nine months of 2006 which includes a decrease of $1.8
      million of applied overhead, a $1.5 million lower-of-cost-or-market adjustment
      for materials in inventory in 2007. We also had an increase of $274,000 for
      salaries and accrued compensation. Offsetting these are reductions in temporary
      help and consultants of $734,000, travel related expenses of $672,000,
      professional fees of $656,000, supplies of $506,000 and fringe and benefits
      costs of $255,000.




-
          17
          -




**SELLING
      AND MARKETING**





Selling
      and marketing expenses of approximately $331,000 for the nine months ended
      September 30, 2007 decreased by approximately $89,000 from the $420,000 of
      expenses recognized in the nine months ended September 30, 2006, reflecting
      reduced salaries and travel costs.





**RESEARCH
      AND DEVELOPMENT**





Research
      and development (“R&D”) expenses decreased approximately $2.4 million during
      the nine months ended September 30, 2007 as compared to 2006 primarily due
      the
      re-deployment of our technical staff to our funded projects
      in-progress.




**INTEREST
      INCOME AND INTEREST EXPENSE**





Net
      interest income for the first nine months of 2007 was higher by approximately
      $610,000 from the same period of 2006 primarily because the funds provided
      from
      the August 2006 financing were invested in income producing investments for
      nine
      months in 2007 as compared to less than two months in 2006.





**NET
      LOSS**





Our
      operations for the nine months ended September 30, 2007 resulted in a net loss
      of approximately $9.8 million, an improvement of approximately $1.9 million
      when
      compared to the same period in 2006. This improvement is reflective of
      reductions in R&D expense of approximately $2.4 million and an increase of
      our net interest income of $610,000, offset by a decrease in our gross margin
      of
      $1.0 million and an increase of G&A expense of $243,000.





**LIQUIDITY
      AND CAPITAL RESOURCES**





At
      September 30, 2007, we had approximately $25.4 million of cash, cash equivalents
      and securities available-for-sale. Our cash position decreased during the first
      nine months of 2007 by approximately $5.2 million. During the first nine months
      of 2007, we used approximately $4.9 million of cash in operating activities.
      This amount is comprised primarily of our net loss of approximately $9.8 million
      and an increase in accounts receivable of $1.2 million. Offsetting these are
      non-cash stock option compensation expense of approximately $2.8 million,
      provision for losses on projects of $1.2 million, depreciation and amortization
      expense of $757,000, an increase in accounts payable of $689,000 and a decrease
      in prepaid expenses and deposits of $492,000. During the first nine months
      of
      2007, investment activities used approximately $368,000 primarily from the
      acquisition of equipment while financing activities provided approximately
      $58,000.





In
      the
      course of normal business, we customarily have approximately $500,000 to $1.0
      million of purchase obligations outstanding that typically settle within 12
      months of incurrence.





We
      anticipate that short-term and long-term funding needs will be provided from
      cash and cash equivalents and available-for-sale marketable securities and
      cash
      flow from Government contracts. We believe that we have sufficient working
      capital to fulfill existing contracts and expected contracts in 2007 and 2008.
      The transportable demonstrator contract and at least two of the other Ionatron
      contracts, that presently represent a major portion of our current activity,
      are
      on a cost plus fixed fee basis. This means all work performed is done at our
      Government-approved rates, which include general and administrative costs,
      overhead, labor and materials, fees and profit. These costs are accrued as
      incurred and billed monthly. Other contracts are at fixed prices that have
      commercial type gross margins associated with them.





**BACKLOG
      OF ORDERS**




At
      September 30, 2007, we had a backlog (work load remaining on signed contracts)
      of approximately $9.7 million to be completed within the next twelve months.
      The
      backlog does not include proposals and contracts under negotiation at September
      30, 2007.




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**ITEM
      4. CONTROLS AND PROCEDURES**





**EVALUATION
      OF DISCLOSURE CONTROLS AND PROCEDURES**





Our
      management, with the participation of our Chief Executive Officer and Chief
      Financial Officer, evaluated the effectiveness of our disclosure controls and
      procedures as of September 30, 2007. Based on that evaluation, our Chief
      Executive Officer and Chief Financial Officer have concluded that our disclosure
      controls and procedures are effective to ensure that information required to
      be
      disclosed by us in reports that we file or submit under the Securities Exchange
      Act of 1934 is recorded, processed, summarized and reported within the time
      periods specified in Securities and Exchange Commission rules and forms. During
      the nine
      months ended
      September 30, 2007, there was no significant change in our internal controls
      over financial reporting that has materially affected, or which is reasonably
      likely to materially affect our internal controls over financial
      reporting.





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**PART
      II – OTHER INFORMATION**





**ITEM** **4**  **SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**





At
      the
      Annual Meeting of Stockholders of Ionatron, Inc. held on September 10, 2007,
      72,200,088 shares of Ionatron’s Common Stock, or approximately 91% of the total
      Common Stock outstanding on the record date for such meeting, were represented.





The
      Stockholders of Ionatron elected Messrs. David C. Hurley and James K. Harlan
      as
      Class III Directors with terms expiring at the Annual Meeting of Stockholders
      to
      be held in 2010. Of the shares voted with respect to the election of Mr. Hurley,
      70,792,681 were voted in favor and 1,407,407 were withheld. Of the shares voted
      with respect to the election of Mr. Harlan, 70,828,625 were voted in favor
      and
      1,371,463 were withheld.





Continuing
      as Class I Directors with terms expiring in 2008 are Mr. Dana A. Marshall and
      Mr. James A. McDivitt. Continuing as a Class II Directors with term expiring
      in
      2009 is Mr. George P. Farley.





The
      Stockholders of Ionatron also approved the amendment of the Company’s
      Certificate of Incorporation to effect an increase in the number of authorized
      shares of common stock from 100,000,000 to 125,000,000 shares. Of the shares
      voted with respect to the ratification of the amendment of the Company’s
      Certificate of Incorporation, 68,754,481 were voted in favor, 3,289,292 were
      voted against and 156,315 votes abstained.





The
      Stockholders of Ionatron also approved the adoption of the Company’s 2007 Stock
      Incentive Plan, which provides for the grant of any or all of the following
      types of awards: (1) stock options, which may be either incentive stock options
      or non-qualified stock options, (2) restricted stock, (3) deferred stock (4)
      stock appreciation rights and (5) other stock-based awards. A total of
      10,000,000 shares of common stock have been reserved for distribution pursuant
      to the 2007 Plan. Of the shares voted with respect to the adoption of the 2007
      Plan, 46,805,529 were voted in favor, 8,298,835 were voted against and 55,306
      votes abstained. In addition, 17,040,418 shares were not voted on this proposal.




**ITEM
      6**  **EXHIBITS**





EXHIBIT
              NUMBER
            DESCRIPTION31.1
            Certification
                of Chief Executive pursuant to Rule 13a-14 or 15d-14 of the Securities
                Exchange Act of 1934, as adopted pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.31.2
            Certification
                of Chief Financial Officer pursuant to Rule 13a-14 or 15d-14 of the
                Securities Exchange Act of 1934, as adopted pursuant to Section 302
                of the
                Sarbanes-Oxley Act of 2002.32.1
            Chief
                Executive Officer Certification pursuant to 18 U.S.C. Section 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.32.2
            Chief
                Financial Officer Certification pursuant to 18 U.S.C. Section 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.




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**SIGNATURES**




Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.


**IONATRON,
                INC.****By**
            **/s/
              Dana
              A, Marshall**Dana
                A. Marshall
              Chief
                Executive Officer and President






Date:
      November 9, 2007




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